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TMI Blog2016 (8) TMI 256X X X X Extracts X X X X X X X X Extracts X X X X ..... on the order of the ld CIT (A) for AY 2009-10 wherein held that the payment was made for supplying the unskilled and semiskilled labour, which was used for lodging, un-lodging, cleaning of factory and in production process of the appellant. Hence, the amount has to be allowed as revenue expenditure to the appellant and same cannot be capitalized Allowance of deduction on account of order processing charges - Held that:- According to schedule-XV if the audited account of the assessee a sum of ₹ 281827/- was received on account of processing charges. There is no dispute on the amount of total turnover as well as the export turnover. However the only dispute is with respect to profit eligible for deduction shall include the processing charges of ₹ 281827/- or not. According to the provisions of section 10B (4) the profit derived from export of goods is amount which bears to the profit of the business of the undertaking in the same proportion as the export turnover bears to the total turnover. Therefore if the amount of processing charges is the business income of the assessee same is eligible for deduction in ratio of export turnover to total turnover. As ld Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) has erred in allowing additional depreciation u/s 32(1) (iia) of ₹ 8,41,235/- on the items of electric installations, Tools, Dyes and Moulds. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowance of wages payment of ₹ 1,24,26,484/- paid to M/s. Ganpati Enterprises Holding the same as revenue expenditure. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in allowing deduction u/s 10B on the amount of other processing charges of ₹ 2,81,827/- claimed to be received from customers. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing deduction u/s 10B insurance claim of ₹ 7927/- and discount received from suppliers of ₹ 22,459/- 3. The revenue has raised the following grounds of appeal for Assessment Year 2009-10: 1. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in allowing additional depreciation u/s 32(1)(iia) of ₹ 28,02,000/- on the items of electric Installations, Tools, Dyes and Moulds. 2. On the facts and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use, we failed to understand that while allowing the normal depreciation the assets have been accepted as being used and in allowing additional depreciation it is stated that they are not installed. Further, the plant itself exists for the manufacturing of the products and the items purchased by the assessee are also not falling in the negative list such as office equipments etc. we are of the view that the claim of the assessee of additional depreciation is in accordance with the law. Hence, we confirm the order of the ld CIT (A) in allowing the additional depreciation of ₹ 841245/- on electrical installation, tools, dies and moulds. In the result, the ground No. 1 of the appeal is dismissed. 9. The ground No. 2 of the appeal is against the deletion of disallowance of wages payment of ₹ 12426484/- as revenue expenditure. The ld Assessing Officer has noted that wages of ₹ 21907287/- has been paid during the year and there is no substantial increase in the turnover of the assessee. The wages payments have been made to one M/s. Ganpati Enterprise, the assessee did not provide any agreement of wages payments of those parties. As assessee has failed to provide the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me cannot be relied upon for making disallowance of wages. As regards the labour supplied from Ganpati Enterprises, the appellant has filed copy of the agreement entered into on 03.01.2005 with Ganpati Enterprises. As per this agreement, the Ganpati Enterprises was to supply labours for lodging, un-lodging, unpacking, shifting, stacking of material and semi-skilled manpower for production and cleaning work. As per this agreement the appellant was to pay ₹ 2,300/-per month to the laborer alongwith 4.75% ESI Charges, 13.61% PF and EPS and 6% service charges and ₹ 2/-per employee welfare fund. The agreement with Ganpati Enterprises was renewed on 02.11.2006, 28.11.2007, 23.12.2008 with revision in minimum wages every year. The appellant has filed copies of registration of Ganpati Enterprises with Assistant Commissioner of Service Tax, Regional Provident Fund Commissioner, ESIC Faridabad and license of labour contract issued by Haryana Govt. in support of its contention. The appellant claims that labours hired with Ganpati Enterprises was utilized for different purposes as mentioned above, which includes the semi skilled manpower used in the production and clinic work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance of ₹ 78,27,098/-is deleted. 12. On the perusal of the order of the ld CIT(A) we do not find any infirmity in deleting the disallowance. None has been pointed out by the ld DR, in view of this we confirm the order of the ld CIT(A) in deleting the disallowance of wages payment of ₹ 12426484/- paid to M/s. Ganpati Enterprises holding that it is revenue expenditure. In the result ground No. 2 of the appeal is dismissed. 13. Ground No. 3 of the appeal is against the allowance of deduction on account of order processing charges of ₹ 281827/-. The assessee is 100% export oriented unit claiming deduction u/s 10B of the Act. During the year it has received order processing charges from its customers amounting to ₹ 281827/- on which deduction was not allowed as it was found that the profit is not derived from export of articles or things. The assessee carried the matter before the ld CIT(A) who in turn held that these charges were received from the customers due to variation in their non standardization items and therefore, it was part of total export turnover and hence, claim of deduction was allowed. 14. On appeal before ld DR relied upon the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the revenue for AY 2008-09. We have also perused the ground No. 1 of the appeal and also are of the view that it is on similar facts. We have already dismissed ground No. 1 of revenue appeal for AY 2008-09 holding that when normal depreciation has been allowed there is no reason that additional depreciation should be disallowed for the reason that assets are not installed and used for manufacturing. In view of this we dismiss ground No. 1 of the appeal of the revenue. 22. Ground No. 2 of the appeal of the revenue is against deleting the disallowance of wages payment of ₹ 7827098/-. 23. Both the parties confirmed before us that ground No. 2 of the appeal of the revenue for AY 2008-09 and facts of this ground are similar. We have also perused the facts of the appeal and are also convinced that the grounds are similar. While deciding the appeal of the revenue for AY 2008-09 we have deleted the disallowance in absence of any evidence about the use of labour for constructing any capital asset. Therefore, as we have already deleted the disallowance as AY 2008-09 on identical issue, for similar reasons the disallowance of ₹ 7827098/- made during the year is also not su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted because of the pressure from the bank for immediate payment of loan by Oriental Bank of Commerce. Since appellant was not in a position to pay the entire loan to OBC, it approached to Axis Bank Ltd. who had agreed to extend the credit facility of ₹ 13.04 crore. The appellant has filed copy of account of loan processing charges and copy of the bank account wherein loan processing charges have been debited to the appellant's account. These pages are filed at 182 to 185 of the paper book. The appellant has also filed sanctioned copy of credit facility of Axis Bank to the appellant. In view of the above it is established that Swap Charges paid to OBC for converting loan from Euro to Indian Rupees and processing charges paid to OBC for shifting of loan from OBC to Axis Bank Ltd. are revenue expenditure incurred wholly and exclusively for business purposes of the appellant. Hence, same are fully allowable. The Assessing Officer was not justified in treating the Swap Charges and Processing Charges as capital expenditure, therefore, the disallowance made by the Assessing Officer of ₹ 36,37,151/-is deleted. As a result, the appellant gets a relief of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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